In Wednesday night’s State of the Union, Republicans refused to applaud President Obama’s proposed bailout tax on the nation’s biggest banks, and as Ryan Grim reported, House Republicans are working with the Chamber of Commerce to kill the proposal outright. Meanwhile, in the Senate, it seems that pronouncing blanket opposition to every facet of regulatory reform is the activity of the day:

SEN. RICHARD SHELBY (R-AL): I would never support a [bank] tax…If you have a bank tax, you are going to take money out of the banks and then you…don’t have money to lend.

SEN. ROBERT BENNETT (R-UT): We’re firm. A separate consumer protection agency is a nonstarter.

American Banker reported that the senate appears “as divided now on key parts of the legislation as they were last year despite two months of bipartisan talks.” Shelby even told Fox Business that “there’s always a possibility of getting nothing up here because to move a bill of this complexity, we’re going to have the have bipartisan agreement.”

This validates the idea coming from, among others, Paul Krugman, who believes that it’s imperative that a strong financial reform bill be brought to a vote, so we can all see who votes against it. “Expose the hollowness of their populist posing,” Krugman wrote. “In short, take on the banks — and force those who are covering for them into the open.” Logically, this means pushing for the vote even if it means that the measure doesn’t pass the first time.

Yesterday really illustrated how far the GOP is willing to go with its straight opposition to literally everything. For instance, “the Senate took a vote on extending the federal debt ceiling — without which the United States would go into default. All 40 Republicans voted no.” And it also “took a vote on requiring Congress not to pass legislation that it can’t pay for. All 40 Republicans voted no,” despite the fact that some of them had, in the past, bucked their own party to support the very same idea. As Steve Benen put it, “GOP lawmakers are so reflexive in saying ‘no’ to everything, they end up opposing ideas they support, and at that point, reason has no meaning.”

And in the end, some regulatory window dressing that passes with a few Republican votes isn’t going to do much good for the safety of the economy. In fact, it could be totally counterproductive, as the system won’t be shored up, but people will operate under the assumption that it is. Since, at the end of the year, Senate Banking Committee Chairman Chris Dodd (D-CT) is retiring and will likely be replaced by the very bank-friendly Sen. Tim Johnson (D-SD), time is of the essence to get a strong bill crafted in the Senate, and to lay down some benchmarks for which lawmakers are on the side of consumers and which are going to bat for the big banks.

In his State of the Union address last night, President Obama urged the Senate to adopt pay-as-you-go rules (PAYGO), which essentially stipulate that all spending increases will be offset by either cuts elsewhere or tax increases. “When the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason for why we had record surpluses in the 1990s,” Obama said.

Today, the Senate followed through, and considering all of the deficit fearmongering that has been going on in Congress, you’d think that it would have passed by a fairly wide margin. But no. Instead, the rules passed on a party line vote of 60-40.

And the blanket Republican opposition is particularly interesting considering that some Senate Republicans used to support PAYGO, even when it was opposed by their own party. For instance, in 2004, three current Senate Republicans — Sen. Olympia Snowe (R-ME), Sen. Susan Collins (R-ME), and Sen. John McCain (R-AZ) — joined 47 Democrats in adopting PAYGO, against the majority Republicans’ wishes (although the rule was ultimately scuttled when Congress failed to pass a budget). The next year, the same three senators were joined by Sen. George Voinovich (R-OH) in a failed attempt to implement the rule.

Yet all four of them opposed the rule today. Here’s what they’ve had to say in favor of PAYGO in the past:

VOINOVICH: I just don’t understand how we can continue to go this way. We’re living in a dream world. This deficit continues to grow.

COLLINS: [PAYGO is] much-needed restraint for members of Congress as we wrestle with fiscal decisions.

SNOWE: I believe now is the time for both ends of Pennsylvania Avenue to commit to pay-as-you-go rules for both revenues and spending.

Just last year, Snowe approved of Obama’s advocating for PAYGO. And in the last few weeks, all of these Republicans have voiced concerns about the deficit and spending. So what changed? And why did all the supposed deficit hawks in the Senate — like Sen. Judd Gregg (R-NH) — vote against it as well? Could it be that they’re actually deficit peacocks, who “like to preen and call attention to themselves, but are not sincerely interested” in addressing deficits?

In last night’s address, Obama chided Senate Republicans, saying that “just saying no to everything may be good short-term politics, but it’s not leadership. We were sent here to serve our citizens, not our ambitions. So let’s show the American people that we can do it together.” They’re not off to a good start.

DJ Carella contributed research to this post.

During last night’s State of the Union address, President Obama defended the government’s steps to shore up the banking system — particularly the Troubled Asset Relief Program (TARP) — calling them “necessary,” but “about as popular as a root canal.” He then emphasized his intention to implement a fee on the banks aimed at recouping all of the money spent on TARP:

I supported the last administration’s efforts to create the financial rescue program. And when we took the program over, we made it more transparent and accountable. As a result, the markets are now stabilized, and we have recovered most of the money we spent on the banks. To recover the rest, I have proposed a fee on the biggest banks. I know Wall Street isn’t keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.

Notably, the Republicans did not join the Democrats in applauding the notion that banks ante up for the full cost of the bailout. Watch it:

As the New York Times’ Gail Collins wrote, “of course, everybody hates the bankers, except the Republicans who sat on their hands when the president called for taxing them.” And the GOP has made no qualms about its intention to oppose the bank fee, citing the usual argument that a modest fee on banks who can afford to pay billions in bonuses will somehow lead to crushing job loss.

In addition to withholding applause, House Republicans are actively working with the U.S. Chamber of Commerce to kill the tax outright. As Ryan Grim reported, Rep. Peter King (R-NY) is attempting to gin up signatories to a letter opposing the bailout tax, which he intends to send to Obama. And King “splashes in bold across the top of the letter: ‘The U.S. Chamber of Commerce strongly supports this effort.’” The Chamber spent a whopping $123 million on lobbying efforts in 2009, including $71.1 million in the last three months of the year.

There are plenty of good economic reasons for the tax, including that it acts as a small payment for all of the subsidies which the big banks have taken advantage of over the past year outside of direct TARP funds. And if the large banks do attempt to pass the cost of the fee onto consumers, which Republicans continually claim they will, that’s all the more reason for consumers to find a smaller institution like a community bank or a credit union with which to do business. As James Kwak wrote, the fee is “simply sound regulatory policy (though, again, too small).”

Of course, the Chamber doesn’t support placing any limit on any industry, even when that industry brought the economy to the brink of collapse. And the GOP’s joining with it shows that the party has the same aversion to common sense measures.

For a while it looked as if compensation on Wall Street for 2009 would eclipse the record level of 2007, but in the end, the banks scooted in just under the bar, thanks to some last minute reductions by some of the Street’s biggest players. But that certainly does not mean that all is well in the world of Wall Street pay.

Take, for instance, today’s New York Times story on ailing banks that are nevertheless doling out huge bonus packages. This is a throwback to 2008, when failing banks like Merrill Lynch paid out huge bonuses at the same time that they were incurring catastrophic losses.

But one bank in particular stood out in the Times article: Citigroup. According to the Times, “Citigroup paid its employees so much in 2009 — $24.9 billion — that the company more than wiped out every penny of profit”:

[T]o keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.

This month, former Citigroup CEO John Reed slammed Wall Street’s return to stratospheric pay, saying “they just don’t get it. They are off in a different world.” And when Citigroup goes this route, “leaving little left over for shareholders,” that means leaving little for taxpayers, who still own the failed institution. I still can’t understand the hesitancy of Treasury to rein in Citigroup, considering the large stake that the government has in the company.

In the wider sense, this comes back to the inability (or reluctance, when it comes to investment banking) of shareholders to influence pay at the companies which they own. As James Kwak wrote, compensation ratios in the financial services industry should be closer to 30-40 percent (30 to 40 cents of each dollar earned going to compensation), and “shareholders should apply pressure to make this happen; basically, they should try to squeeze labor.”

And there are things the government can do to improve corporate governance and make things easier for shareholders — who often face a herculean task trying to influence anything — including institutionalizing shareholder votes on pay packages.

“The investor in America sits at the bottom of the food chain,” said John Bogle, the founder and former chairman of the Vanguard Group mutual fund. “The financial industry gets paid before their clients, and we get paid whether times are good or bad.” Oh, and Citi will also be hosting a cocktail party at the World Economic Forum in Davos, Switzerland, this week. Can every taxpayer, then, crash it?

Today, a proposal by Sens. Judd Gregg (R-NH) and Kent Conrad (D-ND) to create a statutory commission charged with proposing ways to rein in the country’s deficit failed to garner sixty votes in the Senate, despite the endorsement of President Obama. This comes after the news last night that Obama’s State of the Union tomorrow will include a proposal to freeze “non-security” discretionary spending at 2011 levels for 2012 and 2013.

A few Republicans have voiced cautious support for Obama’s spending freeze (including, of course, Sen. John McCain), but on Fox News today, Sen. Richard Shelby (R-AL) criticized the move for having no substance. Shelby would prefer a deficit commission, and his version is possibly the most bizarre that I’ve heard yet:

I think [the spending freeze is] more politics than substance. What we really need is a meaningful, citizens, presidential people to put together a commission, not to raise taxes to balance the budget but to cut programs. Everything should be involved. But that’s going to take a lot of political will, it has to start with the President, and it would have to end up on Capitol Hill. We’re not there, this proposal there, goes nowhere like that.

Watch it:

Yikes. So real action on the deficit will come from a commission of “citizens” and “presidential people” (whoever that might be), who set out to balance the budget solely by cutting programs? And “everything should be involved,” except revenue? This is the epitome of an idea that is more politics than substance.

Even though balancing the budget with spending cuts alone is simply impossible, Shelby is just the latest in a line of Republican lawmakers and conservative activists who want to see a commission that is explicitly barred from considering tax increases. In an interview with CNS News, former Sen. Pete Domenici (R-NM) actually chided Republicans for taking this view. “I’m sorry that some Republicans think otherwise, but I was there [in the Senate] a long time, and I don’t think you can do spending [cuts] alone…It’s got to be a package, and – to my way of thinking – it’s got to have taxes on the table,” he said. Former Reagan official Bruce Bartlett agreed, writing “the idea that revenues should be completely off the table is simply insane.”

Exempting entitlements and defense spending, “the rest of the budget needs to be cut by 51 percent to have a balanced budget in 2014, or by 27 percent to get [the deficit] to 2 percent of GDP.” So it’s really no wonder Shelby wants to outsource that kind of drastic gutting to somebody else, rather than pin his own name on it.

Last week, the Center for American Progress’ Michael Linden penned a piece explaining how to spot a deficit peacock, which is a faux deficit hawk who is more interested in scoring political points and ceaselessly harping about the deficit than actually making any of the necessary choices to bring the country’s long term budget under control.

In the piece, Linden wrote that those who “say that the solution is to simply freeze discretionary spending are just peddling fiscal snake oil,” as “a spending freeze would accomplish extremely little in the way of measurable deficit reduction”:

Freezing discretionary spending, the spending that Congress reappropriates every year, at current levels will similarly yield only very small budgetary savings. The federal government spent a bit more than $625 billion on non-defense discretionary programs in 2009. The Congressional Budget Office projects that, in five years, the federal government will spend about $660 billion on the same programs. Freezing non-defense discretionary spending at current levels would therefore only produce a total savings of $35 billion in 2015. That year, the budget deficit is expected to be around $760 billion. Saving $35 billion would solve less than 5 percent of the problem.

Well, as of last night, President Obama plans to implement a spending freeze of sorts, which would cap “non-security” discretionary spending in 2012 and 2013 at the 2011 level. The Washington Post’s Ezra Klein, Huffington Post’s Sam Stein, and TPM’s Brian Beutler all noted the proximity of Linden’s paper and Obama’s pronouncement. Linden provided this statement to The Wonk Room:

If this freeze on “non-security” discretionary spending ends up being the sum total of the President’s plans for long-term deficit reduction, then it falls far short. Non-defense discretionary spending is not the source of the problem and it won’t be a major part of the solution. But if this policy comes as part of a larger deficit-reduction effort that includes reducing tax expenditures, getting to a more sustainable national security budget, enacting health reform, and finding ways to increase overall revenues, then it could be useful as one small piece of a much larger puzzle. The math is clear, however. We simply can’t get from here to balance just on the back of domestic discretionary programs.

It really can’t be emphasized enough how little can be accomplished in terms of deficit reduction by looking only at discretionary spending. Exempting entitlements and defense spending, which is what the President’s freeze does, “the rest of the budget needs to be cut by 51 percent to have a balanced budget in 2014, or by 27 percent to get [the deficit] to 2 percent of GDP.” If Obama is really serious about deficit reduction — and wants to avoid joining Sen. Judd Gregg (R-NH), Sen. Evan Bayh (D-IN), former congressman Harold Ford Jr., and a host of others in the peacock caucus — he needs to push for health care reform, allow the Bush tax cuts on the wealthy to expire, and put cuts in defense spending on the table. There’s simply no other way to do it.

Jared Bernstein, Vice President Biden’s Chief Economist, responded to some of the criticism aimed at the administration by saying that the administration will be “making sure that the freeze either holds steady or increases those parts of the discretionary budget that support jobs and income security for folks who need them, while whacking the wasteful subsidies that support lobbyists and special interests.” That sounds nice, but Bernstein noticeably did not point to defense spending or the undeniable need for more revenue.

In 2005, Jamie Leigh Jones was gang-raped by her co-workers while she was working for Halliburton/KBR in Baghdad. The attack occurred while she was out with a “small group of Halliburton firefighters,” just four days after her arrival in Iraq. After taking a few sips of her drink, she later woke up in the barracks, “naked” and “severely beaten.” Her “breasts were so badly mauled that she is permanently disfigured.”

In an apparent attempt to cover up the incident, the company then put her in a shipping container for at least 24 hours without food, water, or a bed, and “warned her that if she left Iraq for medical treatment, she’d be out of a job.” Even more insultingly, the DOJ resisted bringing any criminal charges in the matter.

Jones tried to sue the company for failing to protect her, but KBR argued that Jones’ employment contract — created for the company under the tenure of then-CEO Dick Cheney — warranted her claims being heard in private arbitration, without jury, judge, public record, or transcript of the proceedings. Basically, KBR argued that Jones’ brutal rape was a workplace injury — nothing more. But in September, the 5th Circuit Court of Appeals ruled in favor of Jones. “Jones’ allegations do not ‘touch matters’ related to her employment, let alone have a ‘significant relationship’ to her employment contract,” wrote the court.

KBR is now petitioning the Supreme Court to reverse the ruling. The contractor is personally going after Jones’ integrity to argue that she shouldn’t have a fair and open hearing. Stephanie Mencimer from Mother Jones reports:

On Jan. 19, it petitioned the Supreme Court to overturn the 5th Circuit Court of Appeals decision allowing Jones to press her case in a civil court rather than in arbitration. Among its many arguments in favor of a high court hearing: that Jones is a relentless self-promoter who has “sensationalize[d] her allegations against the KBR Defendants in the media, before the courts, and before Congress.” … KBR also suggests that much of Jones’ story is fabricated. The company says in a footnote, “Many, if not all, of her allegations against the KBR Defenandants are demonstrably false. The KBR Defendants intend to vigorously contest Jones’s allegations and show that her claims against the KBR Defendants are factually and legally untenable.”

The Department of Defense Appropriations Act, 2010 signed into law by President Obama in December contained an amendment by Sen. Al Franken (D-MN) — inspired by Jones’ story — that prohibits defense contractors from restricting their employees’ abilities to take workplace discrimination, battery, and sexual assault cases to court. Mencimer notes that in its petition, KBR is “clearly miffed about the Franken Amendment, which it credits Jones with getting passed.”

Late yesterday, the Obama administration announced that in Wednesday’s State of the Union Address, President Obama will call for a freeze on non-defense discretionary spending. The freeze — which will keep fiscal year 2012 and 2013 spending at the 2011 level — is designed to save $250 billion over ten years, and will “exempt security-related budgets for the Pentagon, foreign aid, the Veterans Administration and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.”

So it seems that Sen. Evan Bayh’s (D-IN) estimate that “there’s a fighting chance” of Obama proposing a freeze has been proven correct. Of course, during the Presidential campaign, Sen. John McCain (R-AZ) proposed a similar spending freeze, which Obama repeatedly condemned as an “example of unfair burden sharing,” and “using a hatchet where you need a scalpel.” Here’s a compilation placed on YouTube yesterday of Obama scoffing at a spending freeze in all three presidential debates:

The administration’s contention is that, unlike McCain’s proposed freeze, this operates more like a spending cap, with some programs’ funding going up and others down. As Matthew Yglesias put it, Obama is “aiming for what you might call a ‘cut and invest’ strategy — slashing certain programs and boosting others. And I think anyone who looks at it would have to admit that there is, in fact, a lot of discretionary spending on programs of little value.”

But still, many economists have blasted the plan for its potentially anti-stimulative effects and its focus on spending that is not the root cause of the country’s long-term deficits. Nobel Prize winning economist Paul Krugman wrote that the freeze is “appalling on every level…shifting attention away from the essential need to reform health care and focusing on small change instead.” Former Labor Secretary Robert Reich said that the freeze “will make it impossible for [Obama] to do much of anything for the middle class that’s important.” U.C. Berkeley economist Brad DeLong added “this is a perfect example of fundamental unseriousness: rather than make proposals that will actually tackle the long-term deficit…come up with a proposal that does short-term harm to the economy without tackling the deficit in any serious and significant way.”

And at its core, Obama’s decision cedes to the right-wing both the idea that blanket cuts are necessary and the notion that cuts should be focused on domestic programs while defense spending goes untouched. And already, the right-wing is claiming the freeze as a victory, with the National Review’s Jim Geraghty writing, “if the arguments in the coming years are between spending freezes and spending cuts, then we’ve already won.”

Today, CNN released a pretty discouraging poll revealing that “nearly three out of four Americans think that at least half of the money spent in the federal stimulus plan has been wasted”:

Twenty-one percent of people questioned in the poll say nearly all the money in the stimulus has been wasted, with 24 percent feeling that most money has been wasted and an additional 29 percent saying that about half has been wasted. Twenty-one percent say only a little has been wasted and 4 percent think that no stimulus dollars have been wasted.

This isn’t all that surprising, considering the false claims that conservatives have bandied about for months regarding the stimulus, including Senator-elect Scott Brown’s (R-MA) recent assertion that it “failed to create one new job.” As Steve Benen put it, “Congressional Republicans have invested considerable energy over the last year in trying to convince the country that economic recovery efforts were a mistake.”

But according to a new survey of economists in USA Today, the stimulus has done a lot for unemployment, and, in fact, “the government still needs to do more to breathe life into the economy”:

Unemployment would have hit 10.8% — higher than December’s 10% rate — without Obama’s $787 billion stimulus program, according to the economists’ median estimate. The difference would translate into another 1.2 million lost jobs. But almost two-thirds of the economists said the government should do more to spur job growth.

Discussion about the stimulus has tended to focus on little accounting errors, which miss the big picture, or on faulty analyses that fundamentally distort how the package was designed. But economists have consistently found that the stimulus package is working exactly as it should, and that it is simply too small to counteract the economic crisis.

With the facts so obscured, I agree with the Atlantic’s Derek Thompson that Obama should defend the recovery act in his State of the Union address on Wednesday. “He needs to remind Americans where the stimulus money went, how future stimulus spending will target joblessness even more exactly, and why health care reform fits into the narrative of our long term economic recovery,” Thompson wrote.

Also, as Senate Democrats get around to unveiling their jobs bill, they’d do well to remember that economists think more needs to be done to boost the economy. Yes, Republicans have made it abundantly clear that they want no part of a jobs bill (Sen. Mitch McConnell (R-KY) is continuing the disingenuous practice of purposefully conflating job creation with the bank bailouts), and deficit fearmongering is in vogue at the moment. But high lingering unemployment will translate into an economic and political mess for which the party in power will be blamed. As Matthew Yglesias put it, “you don’t need an economic policy that people approve of, you need an economic policy that produces results people approve of — i.e., growth and jobs.”

As part of his theatrical flirtation with a run for New York’s Senate seat, former congressman Harold Ford Jr. had an op-ed in today’s New York Times, in which he said that Democrats “need to shift attention away from health care and toward a bold effort to create jobs, improve the economy and rein in the size of government.” Ford laid out four steps that he believes “we must take immediately to put us, and the nation, on a better course”:

We can start by giving any companies that are less than five years old an exemption from payroll taxes for six months; extending the current capital gains and dividend tax rates through 2012; giving permanent tax credits for businesses that invest in research and development; and reducing the top corporate tax rate to 25 percent from 35 percent…Finally, we need to address budget deficits now rather than waiting for some ideal future economic situation…By focusing on job creation and deficit reduction, we can expand our economy and balance the budget.

As Paul Krugman pointed out, the economic vision Ford outlines “has to set some kind of new standard for cluelessness.” Indeed, Ford’s op-ed is based on a total contradiction: he advocates a slew of supply-side tax cuts (including a big cut in the corporate tax rate) that would balloon the deficit, while laying out nothing in terms of real steps toward deficit reduction, beyond paying lip service to a commission that would recommend some spending cuts.

The cost of the corporate tax cut alone would be about $1 trillion over ten years, or $100 billion per year. As for extending the current capital gains and dividends rates, which are a product of the Bush tax cuts, a similar move in 2008 (which extended the rates through 2010) cost about $51 billion, with more than half of the benefit going to the richest 0.2 percent of households.

As Matthew Yglesias put it, “to make the deficit smaller, you can’t also make revenues smaller. The math isn’t difficult.” Mark Thoma, meanwhile, labeled Ford’s job-creation ideas the “same old tired set of supply side tax cuts that we always hear, most of which only work in the long-run if they work at all”:

To the extent that there would be any job creation effects from these tax cut policies, and some types of tax cuts could help a bit, they are likely to be more than offset by the deficit reduction and his other policy recommendations that work in the opposite direction. Does [Ford] really think voters will reward Democrats for making unemployment worse through deficit reduction? With friends like these, who needs Republicans?

Ford is yet another deficit peacock, professing his concerns about the deficit while not advocating any serious steps to get long-term deficits under control. As Michael Linden wrote, “peacocks prefer scoring political points to solving problems.” And an attempt to score political points is all that Ford’s op-ed amounts to.

In an interview yesterday with Bloomberg’s Al Hunt, Sen. Evan Bayh (D-IN) — who met with members of the administration’s economic team this week — said that he believes there’s a “fighting chance” that President Obama will call for a freeze on discretionary spending in his next budget:

We can do something right here, right now, starting next week. The President can say in his State of the Union address, ‘I’m going to include in my budget a freeze on discretionary spending, I’m drawing the line in the sand, and I’m willing to use my veto pen to enforce that’…I think there’s a fighting chance that he will. That’s what I’m looking for.

Watch it:

“On a personal level people say, well, wait a minute. I’ve got to balance the family checkbook. I’m making do with a little less now. Why can’t the government do the same thing?” Bayh added. Now, Bayh is the signature model of a “deficit peacock”: someone who likes to harp on deficits, while at the same time voting for budget-busting expenditures like a $250 billion tax cut for the heirs of wealthy families. So his approval of a spending freeze fits right in.

What’s more troubling is that the administration might take this seriously. This all stems from Office of Management and Budget Director Peter Orszag asking every executive department to submit three budget proposals, including one that freezes spending and one that reduces spending by five percent. The administration has also made other noise about serious deficit reduction in fiscal year 2010 being under consideration.

There’s obviously something to be said for identifying programs that don’t work or that overlap with other programs. But a straight spending freeze is a blunt instrument that has no place in responsible budgeting. When the Republicans proposed various versions of a spending freeze during the debate over Obama’s first budget (and when Sen. John McCain (R-AZ) had the same idea during the presidential campaign), they were correctly regarded as being in right-wing fantasy land.

Not only is a freeze a poor way to budget that doesn’t take into account priorities or the effectiveness of a particular program, but it will also have an anti-stimulative effect while the economy is still struggling through a middling recovery. Bayh analogizes the federal budget to a family’s checkbook, but the truth is that there is a lack of demand in the economy — an output gap between what the country could produce and what is is actually producing — that only the government can fill. “We cannot invite a W-shaped recession, or an M-shaped recession,” said Rep. John Olver (D-MA), when asked about a spending freeze.

“Do you think we could have a 5 percent reduction in [Low-Income Home Energy Assistance]?” asked Rep. Robert Andrews (D-NJ). “Do you think we could have a 5 percent reduction in food stamps?” The real long-term issues in the budget have little to do with discretionary spending and everything to do with health care costs, entitlements, and plummeting tax revenue in the wake of an economic crisis. A blunt spending freeze sounds nice, but only real reform in those other areas tackles the actual problems with the federal budget.

In the wake of the Obama administration’s announcement yesterday that it will seek new bank regulations “in the spirit of Glass-Steagall,” one line of thought posited that Republicans had been placed into a box, as they wouldn’t want to give the administration a victory on regulatory reform, but they also wouldn’t want to seem too friendly towards the banks.

But mass opposition has been the staple of the Republican strategy towards Obama so far, and early indications are that they won’t be any more helpful with the plan to reform the banks:

SEN. JON KYL (R-AZ): Let’s not be finding a bogeyman so that we can turn public attention away from what they’re doing wrong in the administration.

REP. SCOTT GARRETT (R-NJ): If we want the banks to lend, and we all do, if we want the economy to expand, and we all do, do you really want to start confining the banks and their ability to make profits in order to generate more capital to lend out to the people?

SEN. JOHN THUNE (R-SD): They think if they can create enough animosity toward Wall Street and corporate America, they get into this traditional sort of Democrat rhetoric and tap into the populist anger out there. For Democrats to be successful they’ve got to create a sense of class warfare and an us versus them mindset.

The names being thrown around the most as potential Republican targets for the administration are Sen. Richard Shelby (R-AL), who was the only Republican to vote against repealing Glass-Steagall in 1999, and Sen. John McCain (R-AZ), who along with Sen. Maria Cantwell (D-WA) has introduced a bill reviving Glass-Steagall.

But Shelby already toyed with the Democrats about approving the creation of a Consumer Financial Protection Agency (CFPA), only to lambaste the idea later as “folly and dangerous.” McCain responded to the Obama plan by saying “it seems to me that a number of the proposals [Obama] has move in [the right] direction, but I haven’t had a chance to examine the details.”

Garrett’s statement, meanwhile, basically implies that a profit earned in any fashion — whether its by ripping of unknowing consumers or gambling with federally insured money — is alright by him. But it’s not really the level of profits that we’re talking about here at all — it’s the way in which they were earned. Profits of the sort Wall Street has been seeing in recent years are only achievable by amassing a huge amount of risk, which is backed by American taxpayers because the institutions involved are systemically important. It’s the merging off traditional deposit banking and commercial lending with a hedge fund mentality that is the problem Obama’s plan seeks to address.

“There’s no denying that banks have made a significant move from traditional commercial lines of business, like individual and small business lending, into higher-risk/higher-return investment banking lines like proprietary trading,” said Sen. Kirsten Gillibrand (D-NY). “If we hope to avert the type of catastrophic meltdown we witnessed last year, we must contain the levels of risk and activities the big banks undertake.” And if the GOP wants to play defense for Wall Street, let them do it, so long as they actually have to take votes affirming that position.

According to the New York Times, the Obama administration is looking to revamp its foreclosure prevention program, the Home Affordable Mortgage Program (HAMP), which has been limping along for several months now. The expected changes will streamline some of the income verification procedures and may “include greater assistance for homeowners no longer able to make mortgage payments because their paychecks have shrunk.”

Calculated Risk was unimpressed, writing that the proposal “sounds like another delaying tactic.” And yes, simply streamlining some of the documentation issues on the borrower side doesn’t seem like it will do much good, considering how slowly even fully documented modifications are moving and the trouble (or lack of interest) that lenders have had getting their end of the deal in order.

But the Times also reported that the administration has “begun to consider a new push to reduce loan balances.” “They are looking at equity forgiveness,” said a financial industry executive who speaks regularly with Treasury officials. “There have been a lot of meetings on that.”

If true, this is a good sign, as “underwater” mortgages (where the homeowner owes more than the property is worth) are still a huge problem for which we have few solutions. According to the latest data, about one in four U.S. borrowers is underwater, and not only are most mortgage modifications not reducing principal for borrowers, but many are actually increasing the principal owed.

According to a new study from the State Foreclosure Prevention Working Group, a collection of 12 state attorneys general and three state banking supervisors, more than 70 percent of modifications are pushing borrowers further underwater:

Despite the growing number of loans that are “underwater” (where the homeowner owes more than the property is worth), only 9 percent of loan modifications in October 2009 involved reducing the unpaid balance by more than 10 percent. More troubling, more than 70 percent of modifications result in an increase in the principal amount owed. Given the correlation between negative equity and likelihood of default, the failure to write down principal in connection with loan modifications is a glaring flaw in the current crisis.

“The reality is that the housing bubble has burst,” said Mark Pearce, North Carolina Chief Deputy Commissioner of Banks, and those not addressing principal reduction as a means of reducing foreclosures are “close to being in denial.” Nobel Prize winning economist Joseph Stiglitz said today that a government priority should be figuring out how to write down loan principal.

This week has seen extensive discussion of regulatory reform and changing the way in which banks do business. But that won’t have much of an effect on people’s day-to-day dealings with financial institutions. Cutting principal, however, is something that directly and plainly affects people who are in trouble. And it will help the housing market, which, after all, is where this whole economic fiasco arose. The administration chose not to push for mortgage cram-downs, which would have helped with this problem, and hopefully it has learned its lesson.

Today’s Supreme Court ruling that opens the floodgates to unprecedented political spending by corporations is another major victory for the corporate lobbying giant — the U.S. Chamber of Commerce.

In July, the organization declared its support for Citizens United in an amicus brief arguing that there is “no basis for restricting its core First Amendment right to engage in independent electoral advocacy.” In spite of the fact that the U.S. Chamber has topped lobbying spending year after year, the group had the gall to complain to the Supreme Court that its voice is being “suppressed”:

In particular, the electoral advocacy of the Chamber – a not-for-profit corporation – and of millions of its corporate members has been suppressed. This has occurred even though 96% of Chamber members are businesses with fewer than 100 employees, far from the immense aggregations of wealth hypothesized in Austin. Suppression has been imposed even when candidates have directly attacked business interests and when corporations have unique and valuable insight into the likely consequences of electing or defeating particular candidates. Although this Court has protected the ability of corporations to discuss “issues,” that is no substitute for direct and explicit speech about candidates.

After complaining about its influence being “suppressed,” the Chamber just disclosed that it spent a whopping $123 million to influence federal policy in 2009. Of all the corporations and associations spending money in D.C., the U.S. Chamber tops them all. The Chamber admitted to Roll Call that it was not “suppressed,” but rather, was “active in all of the major debates”:

“It shouldn’t come as a shock to anyone because it was an incredibly active year for the president and the economy,” said Tita Freeman, a chamber spokeswoman. “Hence the chamber was active in all of the major debates that impacted the economy and business community.”

Freeman said the big spike in spending in the fourth quarter was due largely to health care, including issue ads, meetings and letter-writing campaigns.

Aside from health care, the chamber listed a slew of other lobbying issues, including energy and climate change legislation, endangered species regulatory processes, executive compensation and travel promotion.

The Chamber isn’t happy with simply influencing Congress and the administration. It wants more — specifically, the opportunity to purchase its own fleet of friendly lawmakers.

As many federal lawmakers and the Obama administration push for cap-and-trade legislation, health care reform, regulatory reform, and corporate tax reform, the U.S. Chamber stands as the most well-funded opposition to progressive change. The group spent $10-$20 million of insurance-industry-provided cash on fighting reform. After Scott Brown’s victory in Massachusetts, the Chamber was quick to congratulate itself for running television ads in support of the candidate.

Between Brown’s election victory and the Supreme Court ruling, the most anti-reform corporations in the country are circling their wagons and their wallets around the U.S. Chamber and its fight to increase corporate influence in American politics at the expense of the average American. Today’s Citizens United ruling is a gift by the court’s conservative justices to their efforts.

During the presidential campaign, a key plank in then-candidate Obama’s platform was cutting taxes for 95 percent of Americans, but allowing the Bush tax cuts for those in the top tax bracket to expire on schedule in 2011. “I would roll back the Bush tax cuts on the wealthiest Americans back to the level they were under Bill Clinton, when I don’t remember rich people feeling oppressed,” Obama said at the time.

Obama reiterated this commitment as President, saying “we need to end the tax breaks for the wealthiest 2 percent of Americans, so that folks like me are paying the same rates that the wealthiest 2 percent of Americans paid when Bill Clinton was President.” And last week, Treasury Secretary Tim Geithner swatted away reports that the administration was thinking about reversing course and extending all of the Bush tax cuts. “That’s not something we’ve contemplated,” Geithner said.

When asked if the administration would “go along if Congress took such a step,” Geithner replied, “I don’t think that would be good policy for the country, and I don’t think it’s a necessary thing to do.” Well, it seems like Geithner and the administration need to start convincing House Democrats that extending the cuts isn’t necessary:

– REP. GERRY CONNOLLY (D-VA): I think there is a certain logic to leaving well-enough alone for now, given the fragility of the economic recovery.

– REP. HARRY MITCHELL (D-AZ): Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation.

In an era when everyone seems to be running around screaming about the deficit, there’s absolutely no reason to extend these cuts, which this year will give millionaires more in tax breaks than 90 percent of Americans will earn in income. The Bush tax cuts have delivered $715 billion to the wealthiest one percent of the country over the last ten years, and extending the cuts would give households in that one percent $60,000 in additional breaks per year, with millionaires receiving a $150,000 annual break. Over ten years, that amounts to another $1.2 trillion in lost revenue.

Now, Mitchell and Connolly are both making the argument that this is about timing, and that raising taxes may choke economic recovery. Leaving aside that we still have another year before Bush’s cuts expire, as Michael Ettlinger pointed out, “while lower taxes during a recession can help the economy rebound, lower taxes for the wealthy are about the worst way to do it”:

Lower taxes for middle- and low-income people is a much better way to help the economy because middle- and low-income families are much more likely to spend their money than the wealthy. And it’s spending that we need to create the demand that will encourage businesses to hire and invest…If we decide we don’t want to raise taxes in a recession we should instead move the tax cuts around a bit. That is, let the tax cuts on those making over $250,000 expire and use the money to give tax cuts to people who could use the help and — more importantly for the economy — are more likely to spend the money they receive.

Rep. Jim McDermott (D-WA) “dismissed the argument that allowing taxes on investment to rise now would slow the recovery.” “There’s no proof that the Bush tax cuts had anything but a negative effect,” he said.

I noted earlier in the week that the Chamber of Commerce was ginning up opposition to the creation of an independent Consumer Financial Protection Agency (CFPA) by conducting a “fly-in” of small business owners, who were then led to pre-arranged anti-CFPA meetings. The false premise of the Chamber’s theatrics was that the CFPA would be harmful to small businesses.

One of the events that the Chamber organized was a discussion with Sen. Mike Johanns (R-NE), who made it clear that he doesn’t think much of the CFPA:

Johanns outlined his opposition to the CFPA proposal, arguing it would drive up costs on consumers and create an agency with a “potential power grab over the nation’s economy.”

Johanns is vastly overstating what the CFPA will be able to do, but he is right in the sense that the CFPA is meant to grab a bit of power for consumers away from the financial services industry and the regulators which it dominates. Right now, all the power in the regulatory structure lies with the banks, whose fees the regulators count on in order to survive. Giving some power back to consumers and protecting them from predatory practices is an okay shift in my book.

That’s why it’s encouraging to see President Obama throwing his weight behind the CFPA. After reports surfaced last week that Senate Banking Committee Chairman Chris Dodd (D-CT) was considering dropping the CFPA from his regulatory reform proposal, in favor of a trumped up consumer protection division within an existing bank regulator, Obama met one-on-one with Dodd to personally advocate for the agency. One administration official said the CFPA proposal is “nonnegotiable.”

But what can’t happen here is to let the CFPA become the public option of regulatory reform, in that Obama personally backs it and it becomes the crux of the reform effort, only to be dropped in the end. While the bailout tax and today’s proposal to limit bank size and risk-taking are both good steps aimed at reining in Wall Street, the CFPA is the only part of the regulatory reform effort that is directly for consumers and will produce tangible results on their behalf. As Ezra Klein put it, the CFPA is “the only part of [regulatory reform] that voters can easily understand. It’s the only policy that’s popular on its own. It’s the only piece of it that you can actually use to message.” Without it, the direct effect of regulatory reform becomes much less apparent.

And if Republicans like Johanns want to oppose the CFPA for reasons that don’t make any sense, that’s fine, as long as they are forced to actually cast that “no” vote. “It’s the banks versus the people, and it’s time to choose. For me, that’s the frame, and that’s what the conversation is about,” said Harvard Law Professor Elizabeth Warren. “If the White House forces that choice on the Congress, then we’re getting the leadership we need.” Weak regulatory reform is just about as bad as no regulatory reform, so let the right vote with the banks, and then make sure every voter knows where the right’s priorities lie.

Today, the Obama administration plans to announce new limits on the size and risk-profile of banks, implementing what one White House aide called “the spirit of Glass-Steagall,” which was the Depression-era law that separated investment and depository banking.

As the New York Times put it, “the president, for the first time, will throw his weight behind an approach long championed by Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration.” For months, Volcker has been calling for dividing the riskier trading portions of banks from those that deal with insured deposits. And that seems to be the main focus of the administration’s plan:

If the proposal took effect, big banks could be forced to wall off certain activities in their investing banking units — which trade and underwrite securities and make their own bets on markets — from their traditional businesses, which make loans and take deposits…The rules could also keep banks out of the business of running hedge funds, investing in real estate or private equity.

The upshot of the announcement is that banks will no longer be able to gamble with customers’ money that is federally insured. According to the Wall Street Journal, the policy “could have the biggest effect on Bank of America Corp., Wells Fargo & Co., and J.P. Morgan Chase & Co., which control a large amount of U.S. deposits.” The administration’s move coincides with its push to implement a bailout levy on the nation’s biggest banks.

This shift — while right from a policy standpoint as well — is pretty clearly a response to the charge that it is too cozy with the banks. As I pointed out yesterday, poll after poll shows that the administration is seen as offering too much support for Wall Street, and doing to little to improve the economic standing of low- and middle-class Americans. As Salon’s Andrew Leonard put it, “the decision to take a more aggressive stance against Wall Street marks a clear shift in tone, an abandonment of cautious accommodation [with Wall Street] in favor of out-and-out confrontation.”

The administration said that it plans to “work closely with the House and Senate to work this into legislation moving on the Hill.” Of course, we won’t know the true effectiveness of these proposals until more details come out, but you can be sure that, whatever they are, Wall Street will hate the whole thing, and will do all it can do prevent these measures from taking effect.

But this is an issue on which there should be no watering down. If Republicans want to stand in the way and be on the side of the big Wall Street banks, I say let them. As Paul Krugman wrote, “make them vote against it…Take on the banks — and force those who are covering for them into the open.”

This week, the Senate is expected to defeat a proposal by Sens. Judd Gregg (R-NH) and Kent Conrad (D-ND) to form a commission charged with crafting ways to reduce the country’s long-term deficits. But the commission idea is not dead!

Instead, it looks like the Obama administration will create a commission by executive order, which will be “granted broad authority” to come up with a series of deficit reducing “changes” to the tax code and spending programs that Congress would then consider. But if you thought Gregg would be pleased with this development, you’d be wrong:

It’s a fraud among anyone interested in fiscal responsibility to claim an executive order could structure something that would actually lead to action.

This is pretty amusing coming from Gregg, whose “precedent for success” in this matter is the 1983 Greenspan Commission. According to Gregg, the Greenspan Commission was “the catalyst that drove the process” behind that year’s fix for Social Security. But the Greenspan Commission was created by executive order.

Gregg is a good example of what CAP’s Michael Linden is calling “deficit peacocks”: lawmakers who “like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget.” For instance, while Gregg is criticizing those he deems not sufficiently “interested in fiscal responsibility,” he’s voting to cut taxes for the heirs of multi-millionaires. As the Atlantic’s Derek Thompson put it, “if you want to hear politicians croon utter nonsense about the debt with their fingers crossed behind their backs, please listen to Sen. Judd Gregg.”

At the same time, the administration’s design for a commission is about the same as Conrad and Gregg’s. It would involve 18 commissioners — six appointed by Congressional Democrats, six by Republicans, and six by the administration, with the understanding that the administration would name at least two Republicans — and 14 of the 18 would need to agree before their proposal made it to the floors of Congress. So the odds of anything productive coming out of this process are exceedingly small (which means that, as Matt Yglesias pointed out, there’s little point in wasting a lot of energy opposing the commission’s creation).

The only way a commission like this can possibly work is if it’s given a concrete goal and told to find ways to achieve said goal. As Stan Collender pointed out, that’s why base closing commissions work: everyone agrees that bases need to be closed, but they don’t want to decide which ones. But even with an explicit budget goal, I don’t see Republicans on the commission agreeing to anything that even remotely resembles a tax increase, without which budget balance is impossible. It’s far more likely that the commission bogs down into gridlock, and if a solution does come around, it will be because of some agreements that are crafted outside of the commission structure — just like with the Greenspan Commission.